E9.18 (LO 1, 2) Mucky Duck makes swimsuits and sells them directly to retailers. Although Mucky Duck has a variety of suits, it does not make the all-body suit used by highly skilled swimmers. The market research department believes that a strong market exists for this type of suit. It says the all- body suit would sell for approximately $110. Given its experience, Mucky Duck believes the all-body suit would have the following manufacturing costs: $25 30 Manufacturing overhead 45 Total costs $100 Direct materials Direct labour Instructions a. Assume that Mucky Duck uses cost-plus pricing, and sets the price 25% above the product's costs 1. What would be the price charged for the all-body swimsuit? 2. Under what circumstances might Mucky Duck consider manufacturing the all-body swimsuit given this approach? 3. What is the highest acceptable manufacturing cost Mucky Duck would be willing to incur to produce the all-body swimsuit? b. Assume that Mucky Duck uses target costing. What is the price that Mucky Duck would charge retailers for the all-body swimsuit?

E9.18 (LO 1, 2) Mucky Duck makes swimsuits and sells them directly to retailers. Although Mucky Duck has a variety of suits, it does not make the all-body suit used by highly skilled swimmers. The market research department believes that a strong market exists for this type of suit. It says the all- body suit would sell for approximately $110. Given its experience, Mucky Duck believes the all-body suit would have the following manufacturing costs: $25 30 Manufacturing overhead 45 Total costs $100 Direct materials Direct labour Instructions a. Assume that Mucky Duck uses cost-plus pricing, and sets the price 25% above the product's costs 1. What would be the price charged for the all-body swimsuit? 2. Under what circumstances might Mucky Duck consider manufacturing the all-body swimsuit given this approach? 3. What is the highest acceptable manufacturing cost Mucky Duck would be willing to incur to produce the all-body swimsuit? b. Assume that Mucky Duck uses target costing. What is the price that Mucky Duck would charge retailers for the all-body swimsuit?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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